Be Constructively Discontent

I am a fan of quotes- they can be inspiring, disconcerting, and challenging… all at once. Quotes are like a snack for the mind, giving a mental boost or sparking thought that can lead to personal growth. One such quote caught my eye this week, and it came from an unlikely source. In a press release discussing financial performance in the most recent quarter, a company’s CEO said that despite a strong quarter and year-to-date performance that his company is “constructively discontent and resolutely focused on our future…”

What a challenging way to manage a business! The thought of being constructively discontent has gripped me ever since. The quote struck a nerve with me as I have always approached teaching with a similar mindset. The prospect of becoming outdated and stale is disturbing enough that I challenge myself regularly to become a better teacher and scholar. Complacency is the enemy; if you are not growing you are dying.

Who said his company was constructively discontent? It was Muhtar Kent, Chairman and CEO of Coca-Cola. What makes his remarks interesting is the company had a good quarter by all accounts – international sales volume up 5%, net revenue up 45%, and operating income up 17%. These figures coupled with the brand stature of Coca-Cola would make it a prime candidate for complacency, but that is not the case. The company has a long-range plan called 2020 Vision that outlines goals to pursue between now and 2020, a strategy that falls in line with being constructively discontent.

It is easy to be discontent; it can also be destructive. But, when constructive discontent is encouraged, discontent with status quo and exploring avenues for growth keeps an organization and its employees hungry to accomplish more. However, adopting a mindset of being constructively discontent must be a conscious choice- you have to work at it. Don’t settle – I refuse to accept self-imposed limitations – and I hope you will join me in being constructively discontent.

Crisis as a Catalyst for Change

Even the strongest brands eventually face low moments or dark days. It is inevitable- if you operate in the outside world you are exposed to potential crisis. The key to coping with crisis is not trying to avoid it but how you respond to it.

We were reminded on Sunday of the lows that can be faced by a business. IndyCar lost one of its most vibrant personalities when driver Dan Wheldon was killed in a wreck during a race in Las Vegas. The sorrow of Wheldon’s death was great, and the unspoken question arising from the tragedy was “Now what, IndyCar?” What can you learn from this painful event to make racing safer?

History provides many examples of brands in crisis- think Tylenol, NASCAR, Mattel, Coca-Cola, and Toyota, to name a few. These brands experienced crisis related to product safety. In the end, process improvements were made to create quality safeguards that restored brand confidence.

Whether your brand is hurt by product recall, loss of key customers, negative publicity, or some other crisis, you will not be the first to go down that road. For IndyCar, here is hoping that the weight of heavy hearts inspires change that serves as a catalyst for transforming IndyCar into a stronger organization.

The Legacy

Merriam-Webster defines legacy as “something transmitted by or received from an ancestor or predecessor or from the past.” The passing of Apple co-founder and chairman Steve Jobs raises the inevitable question “What is Steve Jobs’ legacy?” Could it be the numerous products introduced over the years that enhanced productivity and provided entertainment value? The list includes McIntosh, iMac, iBook, iPod, iPhone, and iPad. The ways that we work, play, and communicate have been significantly impacted by the genius of Steve Jobs.

I prefer to view Jobs’ legacy differently. It can be distilled to one word: innovation. Steve Jobs dared to be different, not for the sake of being different but to stretch the limits of what could be accomplished. He once said that it did no good to ask customers what they want because they don’t know what they want. And, they don’t know what they want because they do not realize what is possible- the products that could be developed to add value to their lives. Steve Jobs was a visionary in this area- he had a feel for what was possible, more so than the rest of us.

If we want to honor Steve Jobs’ legacy of innovation, it is not by buying Apple products or stock. Instead, we must keep alive his passion for stretching the limits of the possible. Personally, I have been more focused on innovation in my professional work over the past 5 years than at any point in my career. I attribute this focus to the influence of forward thinkers like Steve Jobs. It is imperative that we encourage innovation in business, education, government, and in our communities. Too often, we are mired in the status quo and fearful of doing something different because it has not been tried before. We need to get past our self-imposed limitations and keep the passion for innovation alive.

Beware the Incentive Escalator

Price-based incentives are effective for attracting buyers and generating trial or enticing customers to buy again. But, using price breaks to stimulate sales comes at a cost greater than the amount of discount offered to lure buyers. All efforts to craft a desired meaning for your brand can be negated by a promotion-intensive strategy. An unintended consequence can be that consumers believe your product is not really worth full price if discounts are offered frequently. Although incremental revenue generated from price-based promotions may be realized, the distinction of “work hard vs. work smart” comes to mind. We have to work harder (i.e., sell more) to cover the expense of discounting, yet the potential damage to brand equity can still occur.

Evidence of what I call the “incentive escalator” is found in a report by Experian Marketing Services on search terms related to retailers. Percent-off deals are among the most popular searches, and consumers’ expectations of retailers’ deals seem to be increasing. In 2009, 20% was the most common discount search term; that figure shifted to 30% in 2010. Deals sought by many consumers in 2009 were not sweet enough just one year later. Where does it end? Will 35% be the top discount-related search in 2011? How high will consumers’ expectations soar about the discounts they believe retailers can offer? Similarly, an increase in searches related to free shipping indicates that online shoppers expect to continue to have access to incentives from sellers once they have been exposed to them.

Choose whatever saying you want: the cat is out of the bag; the horse is out of the barn; the toothpaste is out of the tube. Once price-based incentives become a norm associated with your brand there is no turning back. Strive to build customer relationships that are not dependent on price to reduce the chances of finding your brand riding the incentive escalator. Look to brands that you admire- chances are they have succeeded in ways other than discounting.

Marketing Daily – The New Consumer: ‘30% Off Is The New 20%’

The Question Netflix Got Wrong

An interesting email appeared in my inbox Monday morning. It was from Reed Hastings, founder and CEO of Netflix. The subject line, “An Explanation and Some Reflections” got my attention. Was he writing to say that Netflix made a mistake when it implemented separate pricing for its DVD by mail and online streaming services? When I read the first three words of his message I was convinced- “I messed up” suggested Hastings was about to tell us Netflix had a change of heart about its new pricing structure.

Not so fast- he goes on to say “I owe you an explanation.” Hastings proceeds to provide justification for the decision to change the pricing structure. On top of that, he broke the news of Netflix splitting into two businesses, Netflix for online streaming and Qwikster for DVD by mail. Hastings’ message was genuine and the tone was that of someone who realized he had erred in handling the implementation of Netflix’s new business model. But, in the end the message was more of an attempt to save face… and stem the tide of customer defections. Netflix has lost an estimated 1 million subscribers since the change. With more than 20 million customers remaining, we will not shed a tear for Netflix, but the extent of customer defections is significant.

The mistake that Netflix made was that it incorrectly answered a huge question: What would customers do? What would they do after learning that their associations with Netflix of “entertainment delivered as you want it” no longer applied? The changes benefited Netflix only, or at least that was the perception of many subscribers. And, when it comes to brands, perception is reality. I remind my students often that the true owners of a brand are its customers. While a business owns the physical and intellectual property of a brand, its meaning comes from the relationships people form with it. For many subscribers, their relationship with Netflix was shattered when their ability to get entertainment however they wished changed.

I do not fault Netflix for arriving at a decision that changes were needed in its business model to preserve the long-term profitability of the business. But, most everyone (including Netflix management) realizes they damaged brand relationships in the process. So, any change in strategy should be evaluated fully in terms of how customers will react to change? Human nature is to resist change. Marketers must be prepared for the resistance by being able to make a strong case for how change is good for the brand’s real owners.

Brand Essence: Say it in 7

One of the best reads I have experienced this year has been The Accidental Creative by Todd Henry. Anyone who works in a creative field or wants to strengthen his or her creativity should read this book. Unlike many business books, The Accidental Creative goes beyond telling you what you should do and provides guidance on how to become “prolific, brilliant, and healthy.” I have been a fan of Henry’s Accidental Creative podcast for some time; it is a treasure trove of useful ideas for creatives.

An example of actionable ideas in The Accidental Creative is the concept of a 7-word bio. The idea is simple: distill what you do and who you are into a 7-word description. I see it as a cross between mission and position. While Henry discusses a 7-word bio as a tool for individuals (ideal for developing one’s personal brand), it has applicability for organizations, too. Drilling down to 7 words forces an organization to strip away grandiose proclamations and get away from wordy mission statements. In other words, cut to the chase and define what we are as an organization. What is the payoff of having a 7-word bio? It provides grounding and focus that guides decisions on what projects you take on and how you manage relationships.

This week, I have challenged students in my marketing communications class to develop a 7-word bio for their personal brand. It is a challenge I am taking on, too. What are your 7 words?

The Meaning Behind Price

A product’s price is more than the dollar amount required for purchase. Price contains meanings that influence our perceptions of a brand. For instance, high price typically sends a signal of high quality, while a low price may elicit connotations of value, basic, or even low quality. So, it would seem that if a marketer is going to err on setting an optimal price it would be better to be too high than too low. If you subscribe to that belief, you may want to check out how HTC has destroyed that myth.

HTC is aiming at the high end of the tablet market with the Jetstream, perhaps named because its price is sky high! Jetstream is priced at $700 for a 32GB model, plus it requires a two-year contract with AT&T. The price is comparable to the Apple iPad 2; its Wi-Fi +3G 32GB model retails for $729 on the Apple website. The key for taking market share from the leader is to differentiate- in this case, offer something that the iPad does not have. HTC does not succeed in differentiating on benefits or price. It is a high-end offering in a category that has an entrenched high-end brand.

Unfortunately, the HTC Jetstream fails to position itself for success using price. Its “me too” price at the upper end of the market gives no compelling reason for tablet shoppers to pick it over iPad 2. If HTC intended for its price to position Jetstream as a premium competitor to iPad, it appears to have not worked. Is it just a matter of time before the price drops?

What meanings will customers uncover when they encounter the prices of your products or services? You should never have to apologize for the price you set, but be certain that it represents fair value and is consistent with your brand’s identity.

Fast Company – “Forget That iPad, What’s It Gonna Take To Put You In This $700 HTC Jetstream Tablet?

Fighting Customer Fatigue

If you ever were a student of marketing, you learned about the product life cycle. The PLC includes stages of introduction, growth, maturity, and decline- yes, that product life cycle. And, you probably learned about the characteristics associated with each stage. For example, the growth stage is characterized by increased competition as new entrants enter the market and a need to achieve brand differentiation. Hey, that sounds just like what is going on in the daily deals category. Groupon established itself as the dominant brand, and its rapid success attracted a slew of websites with a similar deal-of-the-day concept.

Evidence is appearing that should alarm daily deals marketers like Groupon: traffic on their websites is decreasing. Groupon’s site traffic last week was down 25% compared to early June, and it had its first ever month-over-month traffic decline in July. The drop in Groupon website traffic can be attributed to the large number of options consumers have for daily deals. At some point, “in-box fatigue” sets in and the daily email offers become part of the message clutter that is our lives as consumers.

Marketers can learn many lessons from the daily deals category and Groupon in particular. First, early entry into a market can be advantageous but does not guarantee success. Being first is not as important as being unique. Second, if a business idea is easy to imitate as the daily deals concept has been, it is critical to differentiate in a way that rises above the clutter. Whether it is choice, convenience, service, or some other benefit, creating relevance to customers is essential. Ask Facebook, it has ended Facebook Deals less than a year after it launched. It was nothing more than another feature on Facebook. Farmville is unique; another daily deal offer is not!

Fight fatigue by striving to maintain energy in your brand. Let fatigue claim competitors as its victims. Continuously ask the question “how can we better, different, or unique?”

USA Today – “Websites Selling Daily Deals Lose Luster”

If You Do It, Measure It

Occasionally I run across one of my favorite quotes about advertising from John Wannamaker, a marketing pioneer. He said “half the money I spend on advertising is wasted; the trouble is I don’t know which half.” That reasoning extends beyond advertising; it can encompass all marketing spending as well as expenditures throughout a business. It is unnecessary to take “half” literally – it may be more or less than 50% that is being wasted. The point is that waste is likely occurring, but it is possible that it could be reduced if more emphasis was placed on measurement.

Measuring performance is a weakness for many marketing organizations. They may be exceptional at planning and executing strategies and tactics, but assessing results may lack the same emphasis. Or, the wrong things may be measured if activity is confused with results.

This issue surfaced for me this morning as I listened to the radio. The Chief Operating Officer of the Nashville Predators, Sean Henry, was on a sports talk show discussing the importance of a professional sports franchise being visible and active in the community. Henry stressed that the visibility is not limited to players and coaches, but rather employees throughout the organization should be engaged with the community. To that end, the organization recently launched an initiative called Project 6K. The program’s goal is to reach a cumulative number of 6,000 hours spent by team employees working in the community, or about 40 hours per employee. One comment Henry made that stood out was that employees are already active in the community; those efforts will now be quantified through Project 6K.

I applaud the Nashville Predators for an organization-wide approach to corporate social responsibility. Moreover, it is important that employees’ contributions are being measured to measure productivity in community relations. Also, it will help present a more compelling story to the Nashville community about the level of involvement the Predators organization has in the area.

It would be interesting to assess the impact of activity like the hours invested in Project 6K on marketing results. Did the program contribute to more brand awareness? Did it enhance the image local residents hold for the Nashville Predators? How many leads for ticket customers came from the organization’s involvement in the community? While it is unrealistic to expect every investment to deliver a return in the form of sales or new customers, it is realistic for initiatives like Project 6K to have marketing benefits. So, if you do it, measure it.

The Facebook Flaw

A year ago, the future of the location-based social network Foursquare was uncertain. It was not due to any missteps on its part. Rather, it was the announcement that Facebook was launching a location-based feature known as Facebook Places. The dominant player in social networking was moving into the check-in space? With a miniscule number of users compared to Facebook, the question that loomed was how could Foursquare possibly compete?

Fast forward one year- Foursquare appears to have survived the Facebook threat. Facebook announced this week that Places will no longer be a stand-alone feature on mobile devices. Places never got traction among users. My personal experience was that it rarely worked on my smartphone. Technical glitches notwithstanding, my inclination to check-in is to use Foursquare instead of Facebook. Although my network is significantly larger on Facebook, in my mind Foursquare is the brand for location-based social networking.

Why did Facebook Places not crush Foursquare? And, why is Facebook Deals, a social coupon service, not causing executives at Groupon to lose sleep? The answer to both questions is that while Facebook is ubiquitous and a valuable tool for keeping us connected with other people it cannot be all things to all people. It is another example of a classic branding mistake that experts like Al Ries often lament. As a brand grows, it is natural to seek growth opportunities. But, as brand extensions inch further away from the core offering consumers are not as accepting of the brand’s capabilities. Google has experienced a similar fate as many of its brand extensions have met with less than resounding success.

The Facebook Flaw is not unique; it is same song, another verse of the perils of brand extension. Define what is great about your brand and be the absolute best- differentiate and dominate. But, avoid the temptation to think that your greatness will transfer to products that may be beyond the core of what attracts customers to you in the first place.

Have a great weekend! I’m off to a full day of meetings, but first I am going to check-in… on Foursquare, of course.

MoBlog – “Facebook Kills Places – Is Deals Next?”